Wednesday, May 3–Jim Wyckoff’s morning markets report
Global stock markets were mixed to higher overnight. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. Risk aversion has up-ticked at mid-week, following solid losses in the U.S. stock market Tuesday, led by banking shares. After a period of calm, there are renewed worries about the U.S. banking sector, especially regional banks, whose shares dropped sharply Tuesday. Also, U.S. Treasury Secretary Janet Yellen has warned the U.S. government could be in default on some of its payments by June 1 if the debt limit is not increased. President Biden will meet congressional leaders at the White House next week to discuss the matter.
Another feature in the marketplace this week is plunging crude oil prices that hit a five-week low overnight. Concerns about slowing global economic growth have hit the crude oil market hard. Nymex crude is presently down over $2.00 on the day and trading at $69.55 a barrel. Nymex crude is presently down around $14 a barrel from the April high.
On deck today is the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chairman Jerome Powell. The FOMC is expected to raise its main U.S. interest rate (the Fed funds rate) by 0.25%. T
Said analyst Craig Erlam of OANDA in a morning email dispatch: “Today was always likely to mark the end of the U.S. central bank’s tightening cycle–not that it has explicitly signaled this–but we’ve now reached a stage in which every rate hike could have unwanted and unintended consequences. Turbulence in the banking system in March is evidence of that and the rescue of First Republic Bank by JP Morgan in recent days, and the sell-off that followed in other regional banks, suggests significant stress remains. Which begs the question, why would the Fed opt to tighten at all today when it can see that the financial system is under strain, credit conditions have tightened as a result and the lag with which monetary policy operates means they don’t yet fully understand what the full impact of their recent rate hikes has been.”
The European Central Bank also meets Thursday. The ECB is also expected to raise its main interest rate by a quarter-point. Also, on Friday comes the U.S. employment situation report from the Labor Department.
The other key outside markets today see the U.S. dollar index lower. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.405%. Treasury yields have dipped this week on flight-to-quality buying amid the wobbly U.S. banking stocks.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the weekly DOE liquid energy stocks report, the U.S. services PMI and the ISM report on business services.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly higher in early U.S. trading. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 4,206.25 and then at the February high of 4,244.00. Support for active traders is seen at this week’s low of 4,105.50 and then at last week’s low of 4,068.75. Wyckoff’s Intra-day Market Rating: 5.5
June Nasdaq index futures: Prices are slightly up in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at this week’s high of 13,370.25 and then at 13,500.00 On the downside, shorter-term support is seen at this week’s low of 13,110.25 and then at 13,000.00. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are higher in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight high of 132 6/32 and then at last week’s high of 132 21/32. Shorter-term support lies at 131 even and then at 130 even. Wyckoff’s Intra-Day Market Rating: 6.0
June U.S. T-Notes: Prices are higher in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at 116.00.0 and then at 116.08.0. Shorter-term technical support is seen at the overnight low of 115.17.5 and then at 115.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
EURO CURRENCY
The June Euro currency futures are higher in early U.S. trading. Bulls have the solid overall near-term technical advantage. The shorter-term moving averages for the Euro are neutral early today, as the 4-day is even with the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are neutral to bullish early today. The Euro currency finds shorter-term technical resistance at the April high of 1.1129 and then at 1.1200. Shorter-term support is seen at 1.1000 and then at this week’s low of 1.0972. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
June Nymex crude oil prices are solidly lower and hit a five-week low in early U.S. trading. Bulls are fading fast. The shorter-term moving averages are bearish early today as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $71.79 and then at $73.00. Look for sell stops just below technical support at $69.00 and then at $68.00. Wyckoff’s Intra-Day Market Rating: 3.5
GRAINS
Grain futures prices were lower overnight. Keener risk aversion in the general marketplace at mid-week is keeping the grain market bulls timid. The technical postures for all the grain markets remain fully bearish. Generally good corn and soybean planting weather so far is bearish for the grains. Dry planting weather in most of the Corn Belt reminds grain market bears of the old adage: “Plant in the dust and your bins will bust.”
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission
(CFTC) has said about futures trading (and I agree 100%):
1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
Jim Wyckoff